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For-profit or non-profit: What's the difference?

July 20, 2003|By Jane Adler, Special to the Tribune.

It's hard to sort out the differences among long-term-care buildings because they can seem so much alike. But one clear-cut difference is whether the facility is run by a for-profit corporation or a non-profit organization.

Non-profit facilities are owned by groups with some type of affiliation. Most often it's a religious group that operates a home for its members. But it could also be a home for people in a certain profession or ethnic group. (It should be noted that these homes usually take residents not affiliated with the group.)

"Homes run by non-profit organizations tend to cater to a homogenous group," said Steve Barlam, head of a geriatric care management company in Los Angeles and current president of the National Association of Professional Geriatric Care Managers, a trade group based in Tucson, Ariz. "This leads to a sense of shared values." And, he adds, faith-based homes can provide comfort to seniors of the same religion.

Religious and ethnic groups that operate buildings often say they are mission-driven, which implies they have a higher purpose to serve residents. In some people's minds, this gives the non-profit building an edge because it enjoys a kind of halo effect. But non-profits without an efficient operation can't stay in business either.

"We have to be just as business-oriented as any business," said Monika White, chief executive at the non-profit Center for Healthy Aging in Santa Monica, Calif. "We have to make enough money to meet our expenses."

For-profit facilities are owned and operated by companies obviously trying to make money. There's nothing wrong with that, of course. And these facilities would argue they have to provide superior customer service or they'd be out of business. For instance, the for-profit Belmont Corp. operates 12 assisted-living Belmont Village buildings. The Houston-based company has three buildings in the Chicago area, including a property that opened July 1 in northwest suburban Buffalo Grove.

Belmont is owned by GE Capital, a deep-pocketed parent that has the resources to help develop high-quality services and programs, according to Jeff DeBevec, Belmont spokesman. "We have been able to develop important linkages between experts in the field of long-term care and our residents."

For example, DeBevec says, Belmont is working with the UCLA medical school to develop programs to assess residents with Alzheimer's disease. Belmont also created its dining program in conjunction with the Conrad N. Hilton College of Hotel & Restaurant Management at the University of Houston.

A fair number of for-profits that run long-term-care facilities, especially assisted-living and continuing-care communities, have a background in the hospitality business. Hotelier Hyatt Corp. operates the Classic Residence by Hyatt properties -- expensive continuing-care projects that get high marks for good food and service. It's debatable whether it really matters whether a building is run by a non-profit or a for-profit entity. But it may make a difference when it comes to nursing home care.

A 2001 study of nursing homes showed that for-profit facilities were cited by regulators for deficient care 46.5 percent more frequently than non-profits. For-profit homes had significantly higher rates of severe problems -- situations in which patients were harmed by poor quality. Follow-up research indicates the situation hasn't changed since the first study was done.

"I attribute the quality problems to [understaffing]," said Charlene Harrington, author of the report and professor of social and behavioral sciences at the University of California-San Francisco School of Nursing. She contends that for-profit homes keep costs low by not hiring enough workers to care for residents. Also, she says, for-profits pay lower wages than non-profits, which leads to high staff turnover and poor care. "Consumers need to know this," she said.

Another factor is that for-profit homes usually have a higher percentage of residents receiving Medicaid payments. "Our study shows that the more Medicaid patients there are in a facility, the worse the care," Harrington said.

For-profit nursing home administrators argue that Medicaid reimbursements from the states are not high enough to cover the true costs of long-term care. And Harrington agrees. She also says non-profit homes limit the number of Medicaid residents they accept. "

In Illinois, for-profit nursing homes earmark about three-fifths of their spots for Medicaid residents, according to the Illinois Department of Public Health. Non-profit buildings dedicate about one-third of their spots to Medicaid residents.

"You can't generalize about homes. You have to look at the particular home," said William Kempiners, executive director of the Illinois Healthcare Association, a Springfield-based group that represents mostly for-profit homes. He added that a high census of Medicaid residents will affect the operating budget of the home. Kempiners also said that 70 percent of a home's budget goes for staffing and that this could be affected by the number of Medicaid residents. For consumers, the decision really depends on the individual building. "You have to look at each facility whether it's for-profit or non-profit," Kempiners said, "The facility has to meet the senior's needs."